Monthly Archives: February 2007

‘The unreasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.’ – George Bernard Shaw

About a year ago, our editor Dale Ennis introduced me to an unreasonable man, Tom Kennedy, or Tommy UsuryFree as he styles himself, believes the world would be a better place without interest or ‘usury.’ He’s not alone in this belief: during my research I have discovered a whole group of unreasonable men and women printing and using their own money. They believe they’re sowing the seeds of a better world for all of us. Could they be right?

Most people believe that banks lend out the money their clients leave on deposit. That’s true to an extent, but modern banks also create money out of thin air by making loans to their customers. They do this through an accounting sleight-of-hand known as fractional reserve banking. By holding just a small amount of money in currency or on deposit with the Bank of Canada, banks are allowed to loan out far more money than they can ever redeem. The bank makes a profit on this non-existent money in the form of interest or “usury” as it was traditionally called, while the borrower must now earn enough money to cover both the original amount of the loan and the interest.

For many people, interest payments become a never-ending treadmill. Driven by the need to pay their bills, people sacrifice their families, their health and their lives to work at unfulfilling jobs. Even those who take pride in being debt-free pay the cost of interest in social malfunction, environmental decline and the debt-serving costs of the business they patronize. A lucky few get rich; the rest spend their lives trying to escape the debt trap.

The creation of money by our chartered banks raises some challenging questions. What is so special about paper money that we should have to pay interest when we need more of it to buy a house or operate a business? Why can’t we get a loan for a nominal fee that covers administrative costs and pay it back, as we are able? It certainly didn’t cost the bank anything to create the money in the first place!

It is the injustice of usury that haunts Tom Kennedy and hundreds of others involved in the promotion of various alternatives to legal tender, including multi-party barter and unbacked supplementary currency. The multi-party barter system takes simple two-party bartering to a more useful level. Members negotiate trades among themselves and an independent, third-party agent maintains an open central record of credits and debits. While the system works well for the exchange of services, it is hard to get retailers to sign on. After all, they still have to pay federal cash to their wholesalers. The recording of the trade also creates additional work, and many people can be intimidated by the need to negotiate every trade. How many hours of your time, for instance, are you prepared to give in exchange for an hour of work by a skilled plumber?

Kennedy champions a non-cash-based paper currency system that is backed, not by federal currency like Toronto dollars, but by the assurance that it will be accepted in trade by other members of the community. In a non-cash-based system, your “wealth” is your time, the goods you make, or the services you offer – all of which can be exchanged for supplementary currency in trade with other members of your community. In return, you use the currency you receive to make your own purchases of goods and services from the community. Theoretically, the more members in your group, the broader the range of goods and services available to you. Retailers who buy wholesale from outside the group charge enough federal dollars to cover their costs, and accept partial payment in community currency, which can be used in turn to hire staff from the community. The system encourages the consumption of locally produced goods, creates employment for local workers and builds community-strengthening ties between the traders. And, unlike bank-created money, supplementary currency can be lent out to actively trading members in good standing at 0% interest.

Printing your own currency is a maverick idea and it tends to raise a lot of eyebrows. Why not just use legal tender? Could counterfeiting destroy the system? Is this a way to avoid paying income tax? These are good questions that, if left unanswered, will create more skeptics than converts to the concept of supplementary currency. Let me answer those questions here.

First of all, supplementary currencies are most powerful when legal tender is in short supply due to high interest rates, a lack of jobs or other causes. In Argentina, for example, a supplementary currency called “creditos” has helped the people of that country trade their way around a devastating collapse of the national currency. With the peso barely worth the paper it was printed on and foreign currency hard to come by, Argentines were left without a reliable medium of exchange. They did have time and goods to sell to each other – all they needed was a currency to grease the system. Before long, barter clubs sprang up around the country, served by an assortment of home-grown “papelitos” or paper notes that are still functioning today as currency.

Regarding counterfeiting, early literature on supplementary currency suggested that counterfeiting wasn’t as issue. The Argentinean experience taught us otherwise. For everyone’s protection, supplementary currencies are now printed with serial numbers, watermarks and other security devices. Poorly rendered imitations can be quickly spotted and removed from circulation. But more importantly, supplementary currency has a built-in, self-regulating mechanism against this threat. It anything threatens the integrity of the system, community members can trade the currency at a discount or refuse to accept it at all until the problem is rectified. That’s not an option with legal tender!

When it comes to income tax, supplementary currency is treated like legal tender. As Kennedy explains in the context of his supplementary currency, Tamworth Hours, “Whenever you receive or spend Tamworth Hours, ask yourself: ‘If this were a twelve-dollar bill, would I report it as taxable income or claim it as a deductible expense?’ If the answer is yes, then you should pay tax on it or report it as an expense. If the answer is no, then ignore it.”

To Learn More

There are many good reasons for supporting supplementary currencies. If you’re interested in starting or participating in a local currency group, I encourage you to learn more theory than I’ve been able to offer in this article. Start with Money: Understanding and Creating Alternatives to Legal Tender by Thomas H. Greco Jr. (ISBN:1890132-37-3, available from the author via email at: circ@mindspring.com). In this month’s Products and Services column, I’ve described some supplementary currency experiments underway in Canada. It you live in one of these areas, get in touch with the organization and learn how supplementary currency is revitalizing their community. For an excellent review of Argentina’s response to their currency crisis, see the video “Money” by filmmaker Isaac Isitan (with Carol Poliquin, Canada, 2003). *

Printing our own money is not as unreasonable as it sounds. And if Tom Kennedy and his colleagues are correct, the creation of usury-free local currencies may even speed our progress towards a more caring, sustainable world.

Jennifer Aitkens, writes a regular financial column for Canadian MoneySaver called The Informed Investor. Her column, subtitled ‘Print Your Own Money’ on pages 5 and 6 of the June 2005 issue of Canadian MoneySaver is reprinted here with permission.

Canadian MoneySaver is an acclaimed investment advisory with a recognized reputation for providing a trustworthy and down-to-earth service since 1981. Canadian MoneySaver is published by Dale and Betty Ennis. Box 370, Bath, Ontario K0H 1G0

The U.S. military, intelligence agencies, and conservative think tanks and news organizations are exaggerating China’s nuclear weapons capability to justify developing a new generation of nuclear and conventional weapons, according to a report issued today by the Federation of American Scientists (FAS) and the Natural Resources Defense Council (NRDC).

Likewise, the report found that the Chinese have been citing U.S. weapons upgrades as a rationale for modernizing theirs, locking the two nations in a dangerous action-and-reaction competition reminiscent of the Cold War.

“The Pentagon has been sounding the alarm about China’s nuclear intentions for a long time, but our analysis shows that they are overstating the threat,” said Robert S. Norris, an NRDC nuclear analyst and co-author of the report. “Now that the Soviet Union is gone, the military needs a new threat to justify buying new missiles, destroyers, submarines and fighter planes. So they’re hyping China.”

Based on unclassified and declassified U.S. government documents as well as commercial satellite images of Chinese installations, the 250-page report, “Chinese Nuclear Forces and U.S. Nuclear War Planning,” provides a detailed overview of China’s nuclear forces and its plans to upgrade them. It also describes two nuclear strike scenarios that calculate the casualties that each side would suffer.

The report’s main finding is that the Pentagon and others routinely highlight specific incidents out of context that inaccurately portray a looming Chinese threat. Specifically, the report demonstrates they have been embellishing China’s submarine and long-range missile capabilities.

For the last two years, the Pentagon’s annual report on Chinese military developments cited the intrusion of a Chinese nuclear-powered attack submarine into Japanese territorial waters in 2004 as emblematic of how China’s military is trying to expand its reach deep into the Pacific. What the DOD reports did not mention, the FAS/NRDC report reveals, is Chinese submarine patrols have dropped from a peak of six in 2000 to zero in 2005. Dramatic news coverage earlier this month of a Chinese submarine surfacing in the vicinity of the USS Kitty Hawk carrier group near Okinawa failed to mention that this was the first reported Chinese submarine patrol in nearly two years.

In addition, the report found that China’s sole submarine capable of firing ballistic missiles, which was built in 1981, has never gone on an extended deterrent patrol with nuclear missiles. In fact, the submarine has never been fully operational.

Similarly, U.S. intelligence agencies warn that the Chinese will be able to target 75 to 100 nuclear warheads at the continental United States by 2015. But that prediction assumes China will be able to deploy 40 to 55 new DF-31A missiles before 2015, in addition to two other shorter-range missiles. Given that the Chinese have yet to conduct test flights of the DF-31A, the report concluded that that assumption is highly questionable.

The Pentagon also has made much out of the fact that China’s next-generation missiles will be mobile. But the majority of China’s ballistic missile force always has been mobile, the report points out, and the U.S. military has targeted it as a routine matter since the 1980s. In fact, improved U.S. targeting of Chinese missiles has played a significant role in prompting China to develop new long-range missiles, according to U.S. intelligence agencies.

The report concludes that the United States will be easily able to maintain its overwhelming nuclear superiority over the Chinese for decades. But the report also points out the China needs relatively few warheads to adequately deter the United States. A hypothetical Chinese attack with its 20 nuclear long-range ballistic missiles on 20 U.S. cities would result in as many as 40 million casualties, the report estimates, and blanket large portions of the United States and Canada with radioactive fallout. Likewise, the United States needs relatively few warheads to deter China. A limited and highly accurate U.S. nuclear attack on China’s 20 long-range ballistic missile silos would result in as many as 11 million casualties and scatter radioactive fallout across three Chinese provinces, according to a simulation described in the report.

The report does confirm that China – like all of the declared nuclear powers – is indeed updating its forces. This effort, however, has been moving slowly and is, to a considerable extent, a reaction to U.S. nuclear deployments and military policies.

“Unlike the United States or Russia, the Chinese have taken extraordinarily long periods of time to field new weapons systems,” said Hans M. Kristensen, project director at the Federation of American Scientists and lead author of the report. “And in many cases, their weapons have been obsolete by the time they were finally deployed. But the Chinese still need to be more open about their plans, or they will continue to feed the perception among U.S. military officials that they pose a significant threat.”

The challenge facing China and the United States, said Kristensen and Norris, is to halt their action-reaction dance that only can undermine the more important economic relationship that binds them together. In light of the recent North Korean nuclear test, concern that Japan might decide to build its own nuclear force, and the potential for a nuclear arms race in Asia, their report urges the United States and China to work more closely together to limit each other’s capabilities and better understand each other’s objectives to avoid military competition – or worse.

Earth has a “second moon.” Asteroid 2003 YN107 is looping around our planet once a year.

Measuring only 20 meters across, the asteroid is too small to see with the unaided eye—but it is there.

This news, believe it or not, is seven years old.

“2003 YN107 arrived in 1999,” says Paul Chodas of NASA’s Near Earth Object Program at JPL, “and it’s been corkscrewing around Earth ever since.” Because the asteroid is so small and poses no threat, it has attracted little public attention. But Chodas and other experts have been monitoring it. “It’s a very curious object,” he says.

Most near-Earth asteroids, when they approach Earth, simply fly by. They come and they go, occasionally making news around the date of closest approach. 2003 YN107 is different: It came and it stayed.

“We believe 2003 YN107 is one of a whole population of near-Earth asteroids that don’t just fly by Earth. They pause and corkscrew in our vicinity for years before moving along.”

These asteroids are called Earth Coorbital Asteroids or “coorbitals” for short. Essentially, they share Earth’s orbit, going around the Sun in almost exactly one year. Occasionally a coorbital catches up to Earth from behind, or vice versa, and the dance begins: The asteroid, while still orbiting the sun, slowly corkscrews around our planet.

“These asteroids are not truly captured by Earth’s gravity,” notes Chodas. “But from our point of view, it looks like we have a new moon.”

Astronomers know of at least four small asteroids that can do this trick: 2003 YN107, 2002 AA29, 2004 GU9 and 2001 GO2. “There may be more,” says Chodas. He believes the list will grow as asteroid surveys improve in sky coverage and sensitivity.

At the moment, only two coorbitals are actually nearby: 2003 YN107 and 2004 GU9. The others are scattered around Earth’s orbit.

2004 GU9 is perhaps the most interesting. It measures about 200 meters across, relatively large. And according to calculations just published in the Monthly Notices of the Royal Astronomical Society (S. Mikkola et al., 2006) it has been looping around Earth for 500 years–and may continue looping for another 500. It’s in a remarkably stable “orbit.”

Right now, however, researchers are paying more attention to 2003 YN107 for one simple reason: it’s about to depart. The asteroid’s corkscrew path is lopsided and on June 10th it will dip within 3.4 million km of Earth, slightly closer than usual. Earth’s gravity will then give the asteroid the nudge it needs to leave.

“This is a chance to observe one of these asteroids [on the way out],” explains Chodas.

It won’t be gone forever. In about 60 years 2003 YN107 will lap Earth again, resuming its role as a temporary, corkscrewing moonlet. In due course, other coorbitals will do the same.

Each encounter is an opportunity for study–and possibly profit. Even the most powerful telescopes cannot see much of these tiny asteroids; they’re just specks in the eyepiece. But one day, when the space program is more advanced (see the Vision for Space Exploration), it might be possible to visit, explore the moonlets and tap their resources. “For now, they’re just a curiosity,” says Chodas.